Weekly Report 129

GENERAL SITUATION IN MEXICO

MANUFACTURING INDUSTRY

PIRELLI INVESTS $114 MILLION DOLLARS TO EXPAND PLANT IN SILAO

The Italian company Pirelli expanded its investments in Mexico to convert its plant in Silao, Guanajuato, in the logistics hub of North and Central America for the manufacture of “cyber” tires to meet the demand of autonomous and electric vehicles in the immediate fu ture, after currently manufactures for premium car as semblers.

By injecting US$114 million to expand the Silao tire ma nufacturing plant, Pirelli aims to increase its tire pro duction by 18%, to reach 8.5 million tires by 2025.

Visiting the country, Claudio Zanardo, Ceo of Pirelli North America, said: “Mexico is a strategic area for Pi relli for all its activities in North and Central America.

Most of Pirelli’s Mexican production is destined for the United States and includes our latest line launches and our most advanced products, such as those manufac tured for electric vehicles”.

He specified that the investments, which already to tal 1.2 billion dollars during the 10 years of presence in Mexico, are aimed at developing products that res pond to the specific needs of the market, for which the technological development and innovation center for the manufacture of cybernetic tires is also being built.

Pirelli Mexico currently serves the U.S. market with 90% of its total production, which is estimated at 7.2 million

MANUFACTURING INDUSTRY

tires at the end of this year. The rest is distributed to brands such as BMW, Audi, Ford, Stellantis, Mercedes Benz, among others in the local market.

The governor of the state of Guanajuato, Diego Sin hue Rodriguez said that the Italian company’s factory is one of the three most important worldwide (China and Romania) in terms of technification and skilled la bor, and in the coming years will be developing inte lligent tires, which allow braking ad hoc to the type of soil (dirt, gravel, rain, etc.), as they will have sensors.

“The investment confirms the strategic importance of the plant and will see an increase in production capa city of more than 1 million parts for a total of 8.5 million tires by 2025 when fully operational (7.2 million by the end of 2022). With an expansion of the production area from 16,000 square meters to more than 220,000 square meters and an improvement in manufacturing, the investment will also create 400 new jobs for a to tal of 3, 200 employees when fully operational.”

In celebrating Pirelli’s tenth anniversary in Mexico and the 150th anniversary of its founding, Italy’s ambassa dor in our country, Luigi De Chiara, commented that the Italian tire manufacturer lays the groundwork for the development of the Mexican tire industry and the pursuit of its own brand.

“This is so that Mexico will not only remain as a makeup company, but as a pole of industrial development”, said the diplomat.

Paolo Benea, Ceo of Pirelli Mexico said that “the Silao R&D center will contribute to increase Pirelli’s tech nological and industrial competitiveness in the entire North American region and will improve our capacity to serve and support customers, mainly in the US”.

The investments in Silao will have a direct effect of in creased product availability throughout the Region, in particular, the products that have been in greatest de mand in recent months, such as large diameter tiresfrom 19 inches and larger - and tires for electric vehicles.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference

POLITICA AGENDA

• Elections in Brazil and electoral reform: The head of the Federal Executive acknowledged Lula Da Sil va’s victory in the Brazilian presidential elections. He indicated that the Brazilian election demon strated the good functioning of its electoral insti tute with 148 million voters. He pointed out that two hours after the polls closed, 90% of the votes had been counted. He said that within the frame work of the discussion of the electoral reform in Mexico, a commission of legislators should go to Brazil to see the functioning of its electoral system, which among other things has electronic voting. The President clarified that what is being sought is an electoral reform, not the disappearance of the body in charge of carrying out the elections, nor the electoral tribunal; what is being sought is not to continue with a corrupt and anti-democrat ic system in the hands of the conservatives.

• Sinaloa: He said that there is a campaign in social networks about an alleged meeting with members of the Sinaloa cartel, he clarified that he will go to Sinaloa on a work tour. He highlighted that Sinaloa has 800 thousand hectares of irrigated land, 600 thousand hectares of rainfed land, 6 million tons of corn are produced. He stated that his admin

istration has two fundamental purposes; energy self-sufficiency and food self-sufficiency, there fore food production will be promoted in Sinaloa.

• Plan for the Integration of the Americas: He con siders the need to integrate the entire region of the Americas, similar to what is happening in Eu rope, as he believes that the consumption capac ity and the availability of labor can help. He men tioned that President Biden has already instructed Vice President Kamala Harris to support Central America.

• Informal Preventive Detention: regarding Minister Aguilar’s project, the President indicated that he does not agree with it but is respectful of what the Supreme Court of Justice decides. He consid ers that they are proposing that the bill collectors can get out of jail and that there is impunity for them. He said that it is shameful to protect crimi nals, since it cost a lot for the crime of tax fraud to be typified in this way. These are tax offices with false invoices offering underpayments to the Trea sury. On the other hand, Undersecretary Ricardo Mejia explained that this is a project that allows criminals to carry out their processes in freedom and with certain procedural comforts. This could generate corruption among lawyers and judges.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

and the peso has not been devalued. In terms of security, he highlighted that there is a decrease in homicides and there is governability. Transfor mation is being achieved without violence, he af firmed.

CYBERSECURITY

• Hack to SEDENA: When questioned about the “Guacamaya Leaks”, the President pointed out that certain information must be protected for se curity reasons; however, he emphasized that the best thing to do is to make the public life of the country transparent, so that nothing is hidden. He explained that both SEDENA and the Navy are acting correctly and said that Undersecretary Ale jandro Encinas will report on the complaints of hu man rights violations by the armed forces.

ECONOMY

• Economy: The head of the Federal Executive cele brated that in the post pandemic period there are 1 million more jobs, the economy continues to grow,

• VAT on the Border: To the commitment to attend to the border area in terms of VAT decrease, he pointed out that 20 km of the border line with the United States were going to be considered, since 2019 the program to support the border strip has been applied, in Baja California Norte, Tijuana, Ensenada, Tecate, Mexicali, etc., In the entire bor der the program is applied where half of the VAT is pasted, the option to do this program in Baja California Sur is still being analyzed because it is not a land border, public finances have to be taken care of. He added that a subsidy is being given so that the price of gasoline does not increase, in re lation to the border it is 5 pesos less, this subsidy means 3 billion dollars, without the subsidy infla tion would be 14%, in this way Baja California Sur and the country continue to benefit.

• Revenue Law for 2023: The President thanked the deputies and senators for having approved the Revenue Law for 2023. He mentioned that the Federal Expenditure Law has yet to be approved.

In response to opposition legislators’ claims that the country is going into debt, he explained that none of the current administration’s works are be ing financed with debt. He affirmed that the econ omy is stable, the peso has not been devaluated and foreign direct investment records have been achieved.

ENERGY

• Meeting with John Kerry: President Andres Manu

el Lopez Obrador mentioned that there is a plan to promote renewable energies to generate wind and solar energy and to promote the modernization of hydroelectric plants. This plan will be presented jointly in Egypt in three weeks with the presence of the Secretary of Foreign Affairs, Marcelo Eb rard. Regarding the Sonora Plan, he said that it is an integral plan; they are thinking of replicating the solar plant in Puerto Peñasco; they have not yet decided in which municipalities, but it should be near the industrial parks of the state. Regard ing lithium, he pointed out that extraction will not be allowed if it is not for the benefit of the people of Sonora, for the elaboration of batteries, con ductive chips, etc. He pointed out that Sonora has several minerals, it is the second copper producer worldwide. He indicated that it is not discarded that the Sonora Plan could be promoted in a bi lateral way and could be signed with the visit of President Biden in December or January of next year.

• Investment in Baja California: The Governor shared that yesterday, an agreement was signed so that the state will no longer have problems with “black outs”, a gas plant was purchased in the city of La Paz, investing 180 million dollars, so that Baja Cal ifornia Sur can incorporate gas in the production of energy as the main means. President Lopez Obrador said yesterday the decision was made to purchase a thermoelectric plant in La Paz from an American company, New Fortress Energy; La Paz and Los Cabos will have guaranteed electric en ergy for 8 years to come, while the construction of the new plant is being carried out, which will be finished in 2026. The water treatment plant in Los Cabos will be expanded with an investment of 2 billion pesos. A total of 10 billion pesos will

be invested by the federation in the electric plant; 100 million for the phosphoric stone mine; welfare programs: 3 billion, road from Guerrero Negro to Vizcaino 100 million and an additional 375 million in the PEF 2023.

SECURITY

• Security in Baja California Sur: The Governor of Baja California Sur, Victor Manuel Castro Cosio, commented that with the shared efforts and with the peace and security tables, the ethical and ef fective sufficiency has been found for people to feel safe, however, he does not leave aside 3 im portant issues for public safety: Growing crime of rape, home robbery and maintaining extraor dinary coordination, the Army, Navy and Nation al Guard who have been extraordinary allies, not only in matters of public safety. The Secretary of the Navy, Admiral Jose Rafael Ojeda Duran shared the number of crimes that have been registered in the state in the month of September.

• Armed Forces in Public Security Tasks: Regard ing the extension of the term of the Armed Forces until 2028 in public security tasks, he commented that the strategy will not change “peace is the re sult of justice, all human beings are good, it is the circumstances that lead to antisocial behavior”, that is why there are scholarships and the youth program building the future, we must continue helping people to have the opportunity for better income; guaranteeing study and work for young people.

• Programs run by the SSPC: The Secretary of Secu rity and Citizen Protection, Rosa Icela Rodriguez, reported on the program for regularization of used cars of foreign origin, which has had an advance to

KEY POINTS OF PRESIDENT ANDRES MANUEL

LOPEZ OBRADOR’S

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

provide greater security as it allows vehicle regis tration. As of October 2022, modules are operating in 14 states of the republic, and 701,804 vehicles have been regularized. Regarding the Tianguis del Bienestar program operating in Guerrero, Vera cruz, Chiapas, and Oaxaca, 6,791,298 goods have been delivered to more than 240,000 families.

• Ayotzinapa Case: The President commented that knowing the truth in this case is fundamental. Re garding Tomas Zeron, he mentioned that he ap pears in the file as the second of those responsible and work is being done to obtain his extradition to Mexico, and that he even sent a letter to the Prime Minister of Israel. The Federal President added that he asked Vice President Kamala Harris for her support with some files related to the case, since there are people detained in Chicago who have information on the case. Finally, the President reit erated his confidence and support to Undersecre tary Alejandro Encinas.

HEALTH

• Pulso Salud: The head of the IMSS, Zoe Robledo, informed that the IMSS-Bienestar 2022 plan has an investment of $11,958 million pesos, a budget that has been earmarked so far for 12 states in the country for first and second level infrastructure, as well as for equipment and instruments. He indi cated that in November the states of Campeche, Veracruz and Guerrero will be included, while Mi choacan, Morelos and Oaxaca are scheduled for December. This program is expected to bene fit 19,965,620 people who still do not have social security. He recalled that last Tuesday the Health Care Model for Wellbeing (MAS-Bienestar) was published in the Official Gazette of the Federation.

This model establishes 6 pillars: free of charge, ac cessibility, opportunity, universal coverage,conti nuity, and quality.

• COVID-19: Dr. Hugo Lopez-Gatell, Undersecretary of Prevention and Health Promotion, informed that it has been four months since the COVID-19 pan demic was reduced. Regarding vaccination, the undersecretary indicated that they already have 58% coverage in children from 5 to 11 years old and they continue working on the second doses in order to have complete vaccination schedules. The Undersecretary reminded that it is respiratory virus season and stated that if there is an increase in COVID-19 infections, he will be informed.

INTERNATIONAL

• Mexico-Brazil Relations: The President announced a call he had yesterday with the recently elected President of Brazil, Lula Da Silva. In the call, the President ruled out attending the inauguration be cause he has many pending tasks in Mexico. Like wise, during the call, the President extended him an invitation to the next Pacific Alliance Summit to be held on November 24 and 25 in the country.

NEWS BY STATE

BAJA CALIFORNIA

Last week the State Congress approved the increase of 1.25% over the State Pay roll Tax going from 3% to 4.25%, and the increase in water services minimum fee to MXP$479.94 and over individual cu bic meter consumption based on ranges over 5 cubic meters: 5 to 40 cubic me ters: MXP$84.85, 40 to 100 cubic me ters: MXP$99.58, 100 to 10,000 cubic meters: MXP$103.14, over 10,000 cubic meters: MXP$120.94. Both were con firmed in the State Official Gazette.

SONORA

President Andres Manuel Lopez Obrador said that his government seeks to install new automotive and auto parts plants for the manufacture of electric vehicles in the entity through the Sonora Plan. “It is a plan to promote renewable energies. In general, we are talking about gener ating more wind and solar energy and promoting the modernization of hydro electric plants,” he mentioned.

NEWS BY STATE

NUEVO LEON

Electrical and electronic industry lead job creation in Nuevo Leon, as it is the productive activity that has added the most new jobs since the Covid-19 pan demic began, with 21,263 jobs, from February 2020 to September 2022.

COAHUILA

This Monday the Government of Co ahuila presented the Invest Coahuila strategy and its platforms for attract ing investment and supply: CECCCAV (Coahuila Business Growth in the Value Chain), which is the directory of small, medium and large companies installed in the entity, as well as as the Industrial Map of the State.

QUERETARO

At federal and state level, Mexico has more than 20 green taxes, i.e., for the care of the environment; however, there are in dustrial zones such as Queretaro where companies are seeking to increase this tax charge and even surpass the levels of first world countries such as Denmark, Cana da, or Switzerland. Companies pay at the federal level the Special Tax on Production and Services (IEPS) and the Tax on New Automobiles (ISAN), in addition to re quirements of the Circular Economy Law, while at the state level there are 20 taxes in force in 11 states, in relation to the pre dominant economic sector in each region, these are: Campeche (1), Zacatecas (4), Yucatan (2), Quintana Roo (1), Tamaulipas (1), Baja California (1), Coahuila (1), Quere taro (3), Oaxaca (1), Nuevo Leon (4) and State of Mexico (1). This is an important tax for the industry, since it is used to measure certain activities or products that have an environmental impact or the potential to generate damages, therefore, the main tax objective is that the polluter pays, regard less of the size of the damage caused by its production chain.

JALISCO

During the second quarter of the year, Jalisco was the state that achieved the best performance compared to the country’s main economies: Nuevo Leon, State Mex ico and Mexico City, according to the lat est report on the Quarterly Index of State Economic Activity (ITAEE) of the Nation al Institute of Statistics and Geography (INEGI). The ITAEE is a macroeconomic indicator that reveals the behavior of the economy in the states. As the economy improves at the macro level, there is also a greater spillover and growth opportunities for individuals and households. During the second quarter of this year, Jalisco regis tered an ITAEE of 122.9 points. With sea sonally adjusted figures, this represents a growth of 2.6% compared to the previous quarter and a growth of 5.6% compared to the same quarter of 2021. In comparison with the performance of other states, Nue vo Leon had a growth of 0.7%, the State of Mexico a growth of 0.5% and Mexico City a decrease of 2%, during the second quarter of 2022 compared to the same quarter of 2021.

GUANAJUATO

Mazda and its suppliers, in coordination with the Ministry of Sustainable Econom ic Development (SDES), held a recruit ment event in Irapuato, in order to bring job seekers closer to the companies. In this sense, he explained that “what Maz da offers us are formal opportunities that help us aspire to grow and develop, be sides representing a job with benefits such as health, transportation or food, which comprehensively supports the worker and their loved ones. He added “if you were to enter these companies to participate you would be learning the skills, the model and the way of working of a global employee to become global competitors”. The re cruitment was carried out in person in the municipality of Irapuato and more than a thousand vacancies were offered with pro files for technical and operational levels by representatives of the automotive sector companies, both Mazda and its suppliers: Mazda Logi, Aki Seat, JCS, Kasai, Fujikura, YKM, DNM Bx and Penstone. In addition to facilitating job seekers’ insertion into the labor market, this type of event brings ad vantages to companies in their hiring pro cesses by bringing together in one place all the resources for a first approach. With these actions, the State Government pro motes the development of strategies with the business sector, so that the people of Guanajuato have greater professional op portunities for their incorporation into the

labor market that will allow them to im prove their quality of life and that of their families. Through the six regional employ ment offices located throughout the state, job seekers will be able to access vacan cies offered by companies located in the state, in order to have greater placement options.

SAN LUIS POTOSI

With the purpose of forming a corridor of capital cities of the country in terms of economic development, the director of this area of the Municipality of San Luis Potosi, Jaime Chalita Zarur, held a meeting with his counterpart in Queretaro, Gabri ela Burgos Ochoa, to lay the groundwork for this project. For this reason, he went to the state capital of Queretaro, together with the Deputy Director of Economic De velopment of the Capital, Gabriela Rive ra Grimaldo, to start talks and initiate the project involving the capital cities of the Bajio region. Among the cities with which the joint work is planned to be developed are Guanajuato, San Luis Potosi, and Que retaro, mainly, however, the objective is to create synergy with all the capitals of this important region. Finally, he said that in the coming weeks he will continue with visits to more municipalities to complement the Bajio region of the country and highlight economic development issues.

STATE

AGUASCALIENTES

Manuel Alejandro Gonzalez Martinez, Sec retary of Economic Development, Science and Technology (SEDECYT), held a meet ing with Chinese investors who visited the state, where they learned about the economic, labor, education, security, and social peace conditions prevailing in the state that make it an ideal investment des tination. The official told the investors that the mission of the governor, Tere Jimenez, is to strengthen each of the competitive advantages to consolidate Aguascalien tes as “the giant of Mexico” by betting on the diversification of the productive sec tors as well as the countries of origin of investment. Gonzalez Martinez exposed that 12 companies with Chinese capital are settled in the entity with a direct foreign investment of more than 70 million dollars, in addition to a commercial value that in 2021 exceeded 870 million dollars in ex ports and imports, placing it as the sec ond largest market in sales for Aguascali entes. Finally, the head of SEDECYT said that the interest of foreign investors is still alive and that the agency itself is following up on around 14 projects in the informa tion technology, automotive, electronics and agro-industrial sectors. Some of these projects could be closed before the end of the year and in the first months of 2023, he pointed out.

CDMX

In view of the constant invitations from the oppo sition -especially from the National Action Party- to ally during the 2024 elections, the local leader of Mo vimiento Ciudadano, Royfid Torres, as sured that the orange party will seek to win Mexico City’s Chief of Government on its own, hand in hand with Salomon Chertorivsky, who is currently serving as a federal deputy. Despite the fact that in the 2021 elections, Movimiento Ciuda dano obtained 3.24 percent of the vote in mayoral elections, the party has been growing, taking a totally opposing stan ce, therefore, Royfid Torres reflected that he is looking to build a new political force in Mexico City, where -so far- there is no alliance with PAN.

STATE OF MEXICO

The Water Commission of the State of Mexico (CAEM) concluded the preventi ve maintenance of 86 kilometers of the Cutzamala System’s Drinking Water Ma crocircuit, whose supply cutback affec ted 1.2 million inhabitants of the Valley of Mexico. Through the infrastructure automation mechanism, water will be gradually restored in 11 municipalities. During the maintenance works, CAEM supported with the delivery of more than 4.4 million liters of drinking water to the operating organizations of 10 mu nicipalities, in addition to the water that each municipality distributes normally with its own supply sources.

ECONOMIC RECOVERY

CENTRAL MEXICO - DENSO

On Tuesday, October 25, they inaugurated the third expansion of their plant in Guanajuato with an invest ment of 9.8 million dollars, offering 200 new jobs. Japanese manufacturer of automotive components and systems.

- TSN GROUP

On Tuesday, October 25, announced an investment for the installation of a plant in Queretaro. They plan to create 500 new jobs by 2023, with an investment of 500 million pesos. Manufacture of components for the automotive industry.

- HARTING

On Monday, October 24, inaugurated an expansion of its plant in Puerto Interior, Guanajuato. They plan to generate 192 new jobs by 2023, with an invest ment of 377 million pesos. The plant will specialize in the manufacture of connectors and industrial wiring production.

- PIRELLI

On Monday, October 31, announced a plant expan sion and construction of a research and development center in Silao, Guanajuato. They plan to create 400 new jobs, with an investment of 114 million euros. The plant will specialize in the manufacture of tires.

- CONTINENTAL

On Monday, October 31, announced a plant expan sion in Silao, Guanajuato. They plan to create 1,500 new jobs, with an investment of 210 MDE. The plant will specialize in the manufacture of high-tech elec tronic products.

ECONOMIC RECOVERY

- MOLEX

On Wednesday, October 26, announced the opening of a new plant in Acatlan de Juarez, Jalisco. They plan to create 200 new jobs and 300 by the end of the year with an investment of 130 million dollars. The plant will specialize in the manufacture of compo nents and systems for electric vehicles.

CDMX / STATE OF MEXICO

- VOLKSWAGEN

On Thursday, October 27, laid the first stone to ex pand its plant in Puebla to modernize the application of paint to vehicles with new technologies. The in vestment amount is 764 million dollars.

- ARAUCO

On Thursday, October 27, announced a new plant in Zitacuaro, Michoacan. It plans to start operations by 2025, generating 400 permanent jobs. jobs. Com pany dedicated to the production of forestry mate rials.

- FORD

On Monday, October 31, inaugurated a globalized center to support the company’s different operations around the world, in Naucalpan, State of Mexico. It is planned to have 4,700 jobs on the first day, with a maximum capacity of 9,000 in a 50% teleworking model.

NORTHEAST - RECKITT

On Thursday, October 27, the company inaugurated the acquisition of an industrial dryer in Ramos Ariz pe, Coahuila. With an investment of 35 million dollars and will generate 600 new jobs. Company dedicated to the production of household appliances and auto motive components.

- WILD FORK

On Thursday, October 27, announced the construc tion of a new plant in Anahuac, Nuevo Leon. With an investment of 200 million pesos. Company dedica ted to the production of household appliances and automotive components.

SOURCE: CLUSTER INDUSTRIAL, MEXICO INDUSTRY